We give a general construction for margining derivative contracts. This generalises usefully to futures, options, collateralized loans, and state contracts such as prediction markets. For partly collateralized contracts, each side is long an option on their own defaulting and short an option on...

Futures are contracts to buy or sell things in the future. Holding a futures contract gives an exposure very similar to holding the physical asset since the two prices are related by arbitrage (buying the asset and selling the future or visa-versa).Liquid exchange traded futures markets exist...